On Ice

Here we go again.

Iceland was home to a hot banking sector. Focusing on trade finance, the Icelandic banks attracted deposits from abroad and had assets four times larger than their entire economy. But their undercapitalized banks made some bad loans, and now there isn’t enough cash in the country to bail out the banks.

So the banks are getting loans from the IMF, the English government, and even the Russians. But there’s a hitch. Leveraged financial institutions bought leveraged financial instruments and the Icelandic losses are being magnified through the system. Even a nondescript bank in Lititz, Pennsylvania lost over 18 million dollars.

So expect more headlines about financial losses especially at European banks. It’s not just liar-loans in California anymore. Through the wonders of modern finance, we’re all Icelandic now.

Douglas R. Tengdin, CFA
Chief Investment OfficerHit reply if you have any questions—I read them all!

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Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. -
Leave a comment if you have any questions—I read them all!
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